Cincau Berhad is a listed company on the Bursa Malaysia. The company is financed by a combination of
2 million ordinary shares and RM1.5 million 10% redeemable loan stock. The company's capital structure represents what has been and intended to continue to be, its target capital structure.
The company's management is in the process of assessing a major investment, to be financed from retained earnings, in some depots, like the firm's existing ones. An appropriate cost of capital figure is required for this purpose. The dividend growth model has been proposed as a suitable basis in the estimated cost of equity.
Recent annual dividends per share have been:
2019 RM 0.125
2020 RM 0.135
2021 RM 0.145
2022 RM 0.165
The shares of the company are quoted at RM2.50 and loan stock at RM 85 per lot of RM100. Assume it is the beginning of year 2023 and the loan stock will mature in 4 years' time. Ignore taxation.
A. Calculate the growth factor for the dividend.